So in Part 1, you got a few tips of how to handle your money when you receive a paycheck, but now we get to the main question…what should you do with it from there?

Once you have the money, there are 3 core things you can do with it: Saving, Spending, and Sharing.  Let’s break down ’saving’ first…

Saving – As a teenager, saving the money will probably be the biggest chunk of where your money should go.  Think about it…you still live at home so you don’t have many living expenses (maybe gas, eating out occasionally, perhaps your cell phone).  So one of the best things you can begin to do with your money is to save it.  But save it for what?  For most students, there are three things you can and should be saving towards…

• College Fund – If you’re going to college, that’s going to be your biggest upcoming expense, so start saving for it yesterday.  As a result, this will probably be the biggest part of where your budget goes.  You can put this money in an online savings account to get a better interest rate (see our Links Page for online bank recommendations).

• Car Fund – If you don’t already have one, you may want to save towards a car.  If you do need a car, don’t bother saving for a $20,000 Lexus.  You’re better off saving up $2,000 or so and just getting something that will get you from Point A to Point B.  It probably won’t be your dream car, but if it drives, it will work for now.  Your focus should be on establishing that college fund and emergency fund right now.  Like your college fund, this money can also be saved in an online bank, since you won’t necessarily need to have easy access to it until you’re ready to buy the car.

• Emergency Fund – You really won’t need an emergency until you move out on your own.  But if you’re heading to college in another few weeks or months and will be living on your own, an emergency fund should be a big priority right now.  Your emergency fund should be around $500-$1,000.  I recommend keeping your emergency fund in a money market account or savings account at a local bank or credit union.  You won’t get a huge return on your money, but the key is to keep the money where it’s easily accessible in case of emergency.

TIP: Keep separate accounts for each thing you’re saving towards.  So if you’re saving for college, a car, and building up your emergency fund, you should have three separate saving accounts.  If all the money just goes into one big pot, you’ll end up getting confused and not using the money how you intended to.  Another option is to check with your bank to see if they offer sub-accounts.  This creates smaller accounts within one main account.  This is another good option to keep it simpler for you.  But the key here is this: Keep It Separate.

Tomorrow: Spending The Money.

Related posts:

1. What Should Students Do With Their Money From The Time They Receive It? (Part 5)
2. What Should Students Do With Their Money From The Time They Receive It? (Part 3)
3. What Should Students Do With Their Money From The Time They Receive It? (Part 1)
4. Where’s The Best Place To Save Money?
5. What Should Students Do With Their Money From The Time They Receive It? (Part 4)